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Q. I have recently granted a lease to a tenant in respect of a building out of my freehold interest. They have paid a large premium for this and will not be required to pay rent. However, an associate of mine has said that this might be charged as income. I thought it was a capital receipt?

A: It will depend on how long the lease you have granted is to run for. If it is for more than 50 years, you are treated as having made a part-disposal of your interest, and the premium will all be treated as a capital receipt for this. However, if the lease is for less than 50 years, some of it will be treated as property income. The shorter the lease, the higher the proportion of it taxed as income will be. Speak to us about the correct way to report the gain.

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Added By: Sharon Worger on 13th May 2021 - 16:45
Number of Views: 47
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